Spain’s CIE, India's Mahindra Form Auto Parts Alliance

Bilbao, Spain-based supplier CIE Automotive SA and Mumbai-based conglomerate Mahindra Group have agreed to pool some of their operations to create a new auto parts maker.

The companies say the merger will occur over the next 12 years.

The new publicly traded entity, to be called Mahindra CEI Automotive, will consist of CIE's European forging group and Mahindra's forging business and Systech parts unit. Those businesses generated combined revenue of €2.2 billion last year.

CIE will buy 51% of the new company for about €87 million. Mahindra will take a 20.2% stake. Public shareholders will own the balance.

Mahindra Group's Mahindra & Mahindra SUV making unit will acquire 13.5% of CIE's equity for €94 million. M&M will thus become the Spanish company's second-largest shareholder (after Corporacion Gestamp SL) and obtain two board seats.

Both companies cite geographic benefits from the deal. Mahindra will gain greater access to global markets. CIE, which operates mainly in Brazil, Europe and Mexico will be able to use India as a production hub for Asia.